Question

Hello, this is a question for Master's level Marketing class (selected a subject category of Economics, since no Marketing option, hope that is sufficient). Thanks in advance!!

Assume that you are the product manager for “Snickers” chocolate bars. You sell these to retailers for $ 0.50 each. Retailers sell these bars to consumers for $ 1.00 each. Each Snickers bar package contains a $ 0.10 coupon that consumers can redeem by returning it to the manufacturer (i.e., you). Based on historical data, you expect 10% of the consumers to redeem their coupons. It costs you $ 0.09 to manufacture each bar. In a normal year, you sell 30 million bars, and spend $ 10 million on marketing campaigns.

a.

In order to boost sales in 2019, you are planning to launch an additional campaign involving TV advertising and in-store displays. This additional campaign will cost you $ 2 million. How many additional Snickers bars will you need to sell to break-even on the additional marketing spending/investment of $ 2 million?

b.

If you eventually end up selling a total of 40 million bars during the year, what would be your ROMI (return on the additional marketing spending/investment of $ 2 million)?

c.

Trend research indicates that more and more consumers care about health and wellness. Accordingly, in 2019 Snickers is looking into launching a low-calorie version made with the natural sweetener, Stevia. The new bar will be called “Snickers Lite,” and will be available for sale to consumers at the same $1.00 price point as regular Snickers. Retailers have agreed to work on the same margins as the regular Snickers bars. However, it will cost the company $0.14 to manufacture each bar of “Snickers Lite” due to the more costly natural ingredients. The company will offer a $.10 coupon on the “Lite” bars, similar to that offered with regular Snickers bars and expects similar redemption rates. Preliminary forecasts indicate that the “Snickers Lite” bar will generate annual sales of 4 million bars, but that 40% of those sales will come directly from the regular Snickers brand. Incremental advertising to drive awareness and purchase of “Snickers Lite” is expected to be $1.5 million over the normal annual $10 million spending. Based purely on the economics, would you advise management to launch the new “Snickers Lite” bar? Please show your step-by-step calculations clearly.

Answer 1

The product - It will be a snack bar which can be eaten between the class breaks by the university students to satiate their hunger pangs. It will constitute of a mix of corn, wheat and rice flakes, bound by a caramel syrup. It will also have nuts, dried fruits, roast oats,seeds and hi fiber wheat flour in small quantities. It will be of good taste, and will be a heathier option for those who eat burgars, sandwiches or french fries. There can be multiple flavors based on the assortment of fruits, nuts, chocolate, seeds and other ingredients to suit different tastes.

The Target customers - They are university students in the age group of 18-27, looking for a cost effective, filling and heathier option for consumption betweenn the breaks. However, the product is not limited to the university students only, it can be extended to schools, marketplaces, offices and so on.

Benefits - The bar will be a low calorie, low fat and low sugar alternative to the students who often eat foods laden with these unhealthy ingredients.Being a filling food, it will also satiate their urge to eat now and then. It will also be a cost effective option for the students who are tight on the budget. It will have higher shelf life than other food items, making it easier to store and can also act as an "on the go" snack item on outdoor expeditions of the students.